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III.

When (and how) Promises Become Enforceable rules, doctrines and techniques employed by courts in determining whether agreement has been achieved to such an extent that legal consequences should follow. 1. MUTUAL ASSENT Raffles v Wichelhaus (292) 1864 - contract was for goods to be carried aboard the ship called Peerless there were two such ships, Ds were supposed to buy goods that arrived on the earlier one, and refused to buy goods when they were brought on the second one. Judgment for defendants; There was no consensus on exactly what ship was being discussed, and thus no meeting of the minds. R2C 20 Effect of Misunderstanding (296) (1) There is no mutual assent if parties attach materially different meanings to their manifestations, and either (a) neither or (b) both parties knows that the other one has a difference interpretation. (2) However, As interpretation is true if (a) A doesnt know Bs meaning, but B knows As meaning; or (b) A has no reason to know Bs meaning, but B has reason to know As meaning. Embry v Hargadine-McKittrick Dry Goods (296) 1907 P had been requesting a decision on reemployment from D, so a few days before end of the year he went to see D to say that, if he wasn't given an answer on reemployment, he would quit then and there. D said, "Go ahead, you are all right. Get your men out, and do not let that worry you." D is held to a reemployment contract; Even though there must be a meeting of minds by an agreement of intentions in a contract, intentions are judged by words/actions, here, a reasonable person would judge D's words as promising reemployment. Kabil Developments Corp. v Mignot (300) 1977 P negotiated oral contract with D, but D said there was no contract. D objected to Ps VP testifying that he believed there was a contract. Held: Ps VPs testimony was allowable, for determining whether P believed there was a contract. Wheeler v White (306) 1965 D promised P that D would get loan for P to construct building, or D would loan him the money himself. P started preparing to build, D wound up not being able to get the loan, and P sued. The contract is held indefinite, but D is prevented by Estoppel from arguing this, since he led P to start preparations (damages are only reliance costs, b/c no contract) 2. OFFER AND ACCEPTANCE Morrison v. Thoelke (309) 1963 - Buyers of property sent a contract to sellers, who signed contract and sent it to the buyers' attorney via mail. Before the letter reached the attorney, sellers called attorney and repudiated the acceptance. Since the mail service allows delivery to be stopped, should the postal service be considered an agent of the offeree, making acceptance binding upon receipt? Held: The repudiation was invalid, and the buyers own the land. An acceptance in a bilateral contract is binding upon being deposited in the mail, not upon receipt. Need to draw a line somewhere and mailing is it. R2C 63 Time When Acceptance Takes Effect (a) an acceptance in a manner invited by offeror is complete once it leaves the offerees possession (b) but an acceptance under an OPTION contract is not valid until RECEIVED. Moulton v Kershaw (317) 1884 D sent out to P letter saying they were authorized to sell salt at a low price. P replies asking for 2000 pounds of salt. D then replies with withdrawal of original letter. P sues for breach of contract. Held: this was not a sufficiently definite offer, it was more of an advertisement, and not a specific offer to sell a quantity of salt. Petterson v Pattberg (320) 1928 - D had a bond on P secured by a mortgage on land. D told P that if he paid off the mortgage early, he would write off the $780 bond. When P came to defendant's house, defendant said that he had sold the mortgage and that the deal was off. Held The offeror can revoke a unilateral offer at any time, even immediately before acceptance by the offereeeven if the offeror sees the offeree coming to accept. Here, offer was successfully revoked before acceptance. [Now R2C 45 says that once performance begins, the offer cannot be revoked, as an option contract has been created.] R2C 45 Option Contract created by Part Performance or Tender - (1) where an offer invites an offeree to accept by rendering a performancean option contract is created when the offeree tenders or begins the invited performance, or tenders a beginning of it. (2) offerors duty of performance

is contingent on completion or tender of the invited performance in accordance with the terms of the offer. Carlill v Carbolic Smoke Ball Co. (327) 1892 - D puts out ad saying anybody who gets sick while using their product (designed to prevent getting sick) gets $100, and they have $1000 deposited to show their seriousness. P gets sick and asks for money. D says they dont have to. Court says: yes, they do have to pay. The statement about $1000 shows they were serious. Also, given the circumstances, they dont have to receive written notice before performance of P for their promise to be binding. (for acceptance - person must buy smoke ball, use as directed, and THEN get sick) Sometimes, actor does not need to communicate acceptance; he will inform you if and only if he completes act successfully (i.e. if you put up a sign for a lost dog, offering a reward if he is found); it would be absurd to expect an acceptance to be communicated before a person became ill. Cobaugh v Klick-Lewis, Inc. (331) 1989 P hit hole-in-one on Ds golf course. D had left up a sign from earlier tournament saying that anybody who hit a hole in one won a car. Court holds that a reasonable person would reasonably believe that they could accept the offer, because of the sign, by hitting a hole in one, and therefore there was an offer that was accepted when P hit the hole in one. R2C 29- It is the manifested intent of the offeror and not the subjective intent that determines the persons having power to accept the offer. Allied Steel & Conveyors, Inc. v Ford Mo. Co. (338) 1960 - D purchased machinery from P and sent them an agreement that said it was not binding until signed by P. The agreement also said that P would be liable for injuries from P negligence and from D negligence during installation. While installing the machinery, a P employee was hurt from a D employee's negligence. P, who later signed the agreement, claimed the agreement was not in effect at the time of injury. Held P accepted the contract when it began the installation, and the later signing was just a record of that agreement. An indication of a method of acceptance did not exclude other methods of acceptance, and acceptance occurred when P started performance. Davis v Jacoby (341) 1934 - Caro Davis was treated as a daughter by her uncle and aunt Whitehead, so years later when the Davises were living in Canada and Mrs. Whitehead became ill, Mr. Whitehead wrote them and asked them to come look after him and Mrs. Whitehead. Mr. Whitehead promised that, if they were to come care for the Whiteheads, the Whiteheads would leave the Davises everything in their will. Mr. Davis said they would come after finishing up some business, and on the day the business was taken care of they found out Mr. Whitehead had committed suicide. After arriving and caring for Mrs. Whitehead, the Davises discovered everything had been left to nephews. Held Mr. Whitehead made a contract to create a will, and Mr. Davis accepted his offer with a promise to come care for Mrs. Whitehead. In ambiguous cases such as this, the law is predisposed to find a bilateral (promise for promise) rather than a unilateral (promise for performance) contract. Further, here, the relationship was close that if Whitehead had a promise from the Davises, he would be satisfied that they would take good care of him. R2C 31 where it is unclear whether a contract is bilateral or unilateral, the court will err on the side of assuming it is bilateral. R2C 36 Termination of power of acceptance (1) An offerees power of acceptance may be terminated by (a) rejection or counter-offer by the offeree, or (b) lapse of time, or (c) revocation by offeror, or (d) death/incapacity of the offeror or offeree. (2) power of acceptance is also terminated by the nonoccurrence of any condition of acceptance under the terms of the offer. Brackenbury v. Hodgkin (347) 1917 - A mother asked a daughter in a letter to come live with her and take care of her, and in return the daughter could have the house. After plaintiff daughter moved in the mother instigated arguments and finally deeded the house to a son. Held The mother owes the daughter the land, because the mother's letter was an offer, in writing as required for land, and the plaintiff came and began performance on the offer. Acceptance was in deed (moving in with mother) and not in words. R2C 62 Effect of Performance by Offeree Where Offer Invites either Performance or Promise (1) Where an offer invites an offeree to choose between acceptance by promise and acceptance

by performance, the tender or beginning of the invited performance or a tender of a beginning of it is an acceptance by performance. (2) such an acceptance acts as a promise to render complete performance. 3. LIMITED AND INDEFINITE PROMISES Davis v General Foods Corp. (355) 1937 P wrote D saying P had recipe. D responded saying they would look at it, with the use/compensation to be completely at their discretion. P sent recipe, and sued when D used it without compensating her. Held - Ds letter was too vague to constitute a promise. one of the commonest kind of promises too indefinite for legal enforcement is where the promisor retains an unlimited right to decide later the nature or extent of his performance. This unlimited choice makes the promise merely illusory. Obering v Swain-Roach Lumber Co. (358) 1927 - Plaintiff lumber company signed a contract with defendants, relatives and heirs of J. Henry Buhner, that if plaintiff bought Buhner's land plaintiff would sell it to defendants and keep the lumber from it. Does this contract have mutuality? Held Yes; contract has mutuality because even though the contract upon signing was binding on neither party because it was contingent upon an act by plaintiff, the moment plaintiff performed that act the content was binding on both parties. (may have been illusory at the start, but now it isnt, and you are obligated.) If a contract is dependent upon a future act of plaintiff, that act will provide an acceptance of the offer and consideration. R2C 77 Illusory and Alternative Promises - A promise or apparent promise is not consideration if by its terms the promisor or purported promisor reserves a choice of alternative performance, unless (a) each of the alternative performances would have been consideration if it alone would have been bargained for, or (b) one of the alternative performances would have been consideration and there is or appears to the parties to be a substantial possibility that, before the promisor exercises his choice, events may eliminate the alternatives which would not have been consideration. R2C 78 the fact that a rule of law renders a promise voidable or unenforceable does not present it from being consideration. (for example an oral promise barred by the rule of frauds is still a promise and provides consideration for a written counterpromise.) Wood v. Lucy, Lady Duff-Gordon (361) 1917 - D, who gave her approval to apparel, made an agreement with P to have the exclusive right to place her endorsements on articles of clothing, subject to her approval. In return he would give her one half of all profits, take out any needed copyrights and trademarks, and provide reports of sales. D breached the exclusivity and marketed her own designs, claiming the original agreement was void because, under it, P was not obligated to do anything. Held The agreement might not have obligated P in so many words, but exclusivity of the agreement implied he was to make his best efforts to sell her label, giving consideration to the agreement. Omni Group, Inc. v. Seattle-First Natl Bank (365) 1982 Ds sold property to P with a contract that P would get an engineer's and architect's feasibility report and, if satisfactory, would notify defendants. P didn't express whether it was satisfied or not. Ds refused to proceed with the purchase, claiming the contract was not valid because P's promise was illusory. Held P, if satisfied, was obligated to notify Ds of their acceptance, so their promise was not illusory. This falls into the strain of cases in involving promisor "satisfaction" and is therefore not an illusory promise. (there were two conditions precedent to Ps duty to buy property 1. Receiving report and 2. Report must be satisfactory they were bound to report their satisfaction) Feld v Henry S. Levy & Sons. Inc. (370) 1975 - D made agreement to sell all the bread crumbs it produced to P, with six-month notification by either party for termination. D stopped producing breadcrumbs and, after P refused to pay a higher price, dismantled the equipment and started selling the input bread product to others. D maintains the contract did not require it to produce bread crumbs, only to sell those it produced. Held This is known as an "output" contract and under section 2-306 of the UCC there is sufficient mutuality to uphold the contract. The UCC also states that for exclusive agreements the seller must use good-faith efforts to supply the productsomething that is a question of fact here. Only a "genuine imperiling of the very existence of its entire business caused by the production of the crumbs would warrant cessation of production of that item."

UCC 2-306 Output, Requirements and Exclusive Dealings - (1) a term that measures the quantity by the output of the seller or the requirements of the buyer means such output or requirements which may occur in good faith except that no quantity unreasonably disproportionate to any stated estimate or in the absence of a stated estimate to any normal or otherwise comparable prior output or requirements may be tendered or demanded. (2) a lawful agreement by either the seller or buyer for exclusive dealing in the kind of goods concerned imposes unless otherwise agreed an obligation by the seller to use best efforts to supply the goods and by the buyer to use best efforts to promote their sale. Corenswet, Inc. v Amana Refrigeration (373) 1979 agreement severable for any reason with 7 days notice, for any reason good faith requirement in dealings did not prevent them from terminating without case, when the contract explicitly allowed for without cause termination. even if the termination was arbitrary and without cause it was ok. (giving business to somebody else could also be a good reason) Sun Printing & Publishing Assn v Remington Paper & Power Co., Inc (376) 1923 - P is a newspaper company who contracted to buy 16,000 tons of paper from D, a paper mill. The written contract stated that the price and term would be fixed for a short while, and then later to be agreed upon no less than 15 days prior the end of the term in effect, but in no case was the price to be higher than a standard market price. After the preset term had expired, and the next price and term was to be negotiated, the D claimed the contract was incomplete, and refused to make any deliveries at any price. P sued for breach of contract. Held - When a contract is worded as an "agreement to agree", the parties are free not to agree without being liable for breach of contract; contract was expressly written to allow both price and term to be negotiable, and so the court would have been "revising" the contract if it attempted to "construe" it to a reasonable market price and some fixed term that was not negotiated by the parties Empro Mfg. Co. v Ball-Co Mfg. Inc (380) 1989 - Empro wanted to buy Ball-Cos assets. Empro sent Ball-Co a letter of intent to purchase their assets, but the letter required a later final agreement and other conditions (essentially, Empro left themselves outs; lots of missing terms, to be filled in later). Ball-Co bailed and started negotiating with another buyer. Empro filed for a temporary restraining order. The trial court dismissed Empros complaint, saying that the letter of intent had no legal force based on its own insistence that its not a contract. Empro appealed to the Circuit Court. Held complaint can be dismissed even if both parties intended to be bound. Held - not a binding agreement; Empro made clear that it was free to walk, and there was no reason to think that Ball-Co wanted it to be a onesided agreement. R2C 33 Certainty (1) even though a manifestation of an intention is intended to be understood as an offer, it cannot be accepted to form a contract unless the terms are certain. (2) the terms for a contract are certain if they provide a basis for determing the existence of a breach and for giving an appropriate remedy. (3) the fact that one or more terms of a proposed bargain are left open or uncertain may show that a manifestation of intention is not intended to be understood as an offer or as an acceptance. Southwest Eng. Co v Martin Tractor Co. (385) 1970 Failure to agree on terms of payment does not defeat an otherwise valid agreement reached by parties. UCC 2-204(3)- Even though one or more terms are left open a contract for sale does not fail for indefiniteness if the parties have intended to make a contract and there is a reasonably certain basis for giving an appropriate remedy. IV. IDENTIFYING THE BARGAIN 1. THE EFFECTS OF ADOPTING A WRITING PAROL EVIDENCE RULE 3 types of parol evidence: Prior oral Prior writing Contemporaneous oral

Mitchill v Lath (387) 1928 - P wanted to buy a farm from D, but P didn't like the ice house. D orally promised that if P bought the farm, they would remove the ice house. P bought the farm, with a written agreement, and started improving it, but D didn't remove the ice house. Is the agreement to buy the ice house valid? Held No; that oral agreement is obviously linked to, though legally separate from, the written agreement to buy the farm. Such an oral contract that modifies the written one is only valid if 1) the agreement is a collateral one, 2) it doesn't contradict express or implied provisions in the written contract, and 3) it relates to things one wouldn't expect would be in the written contract. In this case, the written contract seems to be full and complete, and one would expect anything relating to an ice house to be included in the written contract. Hatley v Stafford (394) 1978 Buyout provision in lease said land could be bought out for $70/acre; 10 months later, with immature wheat crop on land, D lessors enter land, cut wheat crop and demand P lessee accept $70/acre buyout; lessor says that there was an oral agreement that buyout would only be valid for 30-60 days after signing lease. D says that evidence of oral agreement should not be allowed. Held - it should be allowed. Evidence of oral modifications should only be disallowed if it contradicts express/implied provisions; nothing in lease expressly or impliedly said that buyout period should run indefinitely. Also, this wasnt a sophisticated transaction; parties made up agreement themselves. Finally, contract would have been one sided if interpreted according to D (D could have bought $400/acre wheat for $70/acre). Hayden v Hoadley (400) 1920 evidence showing that D had until October 1 to complete task according to oral agreement was properly excluded; contract that was silent as to timeframe had reasonable amount of time implied, so October 1 Parol Evidence would have contradicted contract. R2C 209 Integrated Agreements (1) An integrated agreement is a writing or writings constituting a final expression of 1+ terms of an agreement. (2) Whether there is an IA is to be determined by the court as a question preliminary to determination of a question of interpretation or to application of the parol evidence rule. (3) where the parties reduce an agreement to a writing which in view of its completeness and specificity reasonably appears to be a complete agreement, it is taken to be an IA unless it is established by other evidence that the writing did not constitute a final expression. R2C 213 Effect of Integrated Agreement on Prior Agreements (1)A binding IA discharges prior agreements to the extent that it is inconsistent with them. (2) a binding completely integrated IA discharges prior agreements to the extent that they are within its scope. (3) an IA that is not binding or that its voidable and avoided does not discharge a prior agreement. But an IA, even though not binding, may be effective to render inoperative a term which would have been part of the agreement if it had not been integrated. R2C 214 Evidence of Prior or contemporaneous Agreements and Negotiations Agreements and negotiations prior to or contemporaneous with the adoption of a writing are admissibile in evidence to establish (a) that the writing is/is not an IA; (b) that the IA, if any, is completely or partially integrated; (c) the meaning of the writing, whether or not it is integrated; (d) illegality, fraud, duress, mistake, lack of consideration, or other invalidating cause; or (e) ground for granting or denying rescission, reformation, specific performance, or other remedy. R2C 216 Consistent Additional Terms (1) Evidence of a consistent additional term is admissible to supplement an IA unless the court finds that the agreement was completely integrated. (2) An agreement is not completely integrated if the writing omits a consistent additional agreed term which is (a) agreed to for separate consideration or (b) such a term as in the circumstances might naturally be omitted from the writing. Interform Co. v Mitchell (403) 1978 2 interpretations of writing 1. Textualist treat the writing as having a unique and quite compelling force. an integrated writing clear in meaning to the reasonable person constitutes the contract between the parties. 2. Intentionalist a writing is integrated when the parties intend it to be and it means what they intended it to mean. (UCC interpretation)

UCC 2-202 terms in agreement may be explained or supplemented by (1) course of dealing or usage, or course of performance, and (b) by evidence of consistent additional terms, unless the court finds the writing to have been intended also as a complete and exclusive statement. Luria Bros. v Pielet Bros Scrap iron & Metal (405) 1979 - Pielet contracted with Luria to deliver a large quantity of scrap metal but completely did not perform. Pielet claimed that they had an oral understanding beforehand that Pielet was depending upon another company for shipment and that they may not come through, in which case Pielet would not be able to deliver. Written contract said sale was unconditional. Held- parol evidence NOT admissible, where contract said unconditional and alleged oral argument allowed for non-delivery under certain circumstances directly contradictory AND would surely have been included had it been agreed to. Long Island Trust co. v International Inst. for Packaging Educ, Ltd (406) 1976 P loaned D $25,000 for 90 days, and then later renewed the loan for another 30 days and loaned an additional $10,000. D claims the latter note is not enforceable, because one of the signators had discussed with the officer of the bank that certain other guarantors had to sign note, and one guarantor was missing. Held The note could be unenforceable because of the oral agreementthere cannot be summary judgment against the defendant. The note did not expressly state that it was an unconditional guarantee, and therefore the oral agreement did not contradict it. (If Ds were "untrustworthy," "devious," or "negligent," would have made the parole agreement invalid.) Lipsit v Leonard (413) 1974 - P worked for D for 9 years in NY under written contracts (during which time D became incorporated), with D allegedly promising P that he would get equity in the business. When they discussed equity, the terms were unacceptable by the plaintiff. P accuses D of breach of contract and fraud because D allegedly never intended to give P a stake in the company. Should summary judgment be issued against the breach of contract complaint? Held Summary judgment is valid against the complaint of breach of contract, because 1) the oral discussions never reached the stage of an enforceable contract, and 2) the parole evidence rule would bar the oral discussions because of the written employment contracts. However; the tort action should be allowed to proceed. New York law allows tort cases based upon fraud to go forward even if not grounded in breach of contract. However, the damages will not be based on expectation of the contract, but on restitution the "out of pocket rule." Bank of America v Pendergrass (416) 1935 - Ds signed promissory note with P "payable on demand." When P tried to collect, Ds claimed P had promised them that they would be allowed to operate the ranch on which they farmed for 1932 without being bothered, that they made the promise without intending to keep it, and that the P soon seized the land on which the mortgage was held after the note was signed. Held Parol evidence to prove a tort of fraud is inadmissable here. Parol evidence is allowed to prove independent facts, but this promise effectively extended the payment of the note for another year, directly contradicting the words of the written agreement. LaFazia v Howe (418) 1990 - Ds purchased a deli from Ps. Ps said that, as they dealt in cash, they didn't have records of income. They showed tax records, but said that the low numbers were not indicative of the actual income. Ds were convinced the deli would make money, so they bought it. There were clauses in the contract stating that the Ds was relying on their judgment, that no representations or warranties were made, and that the agreement constituted the whole agreement. The business never was profitable, but Ds kept paying on the contract. They finally sold the deli and refused to pay the rest. Ps filed a suit for the money, and Ds filed a counter-claim for misrepresentation. Held The Ds cannot claim misrepresentation, because they understood and signed a contract that stated they had not relied on other representation, while represented by an attorney. This was more than a merger clauseit was specific that there was no other representation. If the non-reliance clause isn't true, then there is no way for two parties dealing at arms length to indicate no reliance. Rio Grande Jewelers Supply v Data General Corp. (424) 1984 - A buyer of a computer system sued claiming negligent representation of the system's capabilities. The contract disclaimed all prior representations. Held The plaintiff cannot collect damages, because if a contract that is valid

under the UCC and has a valid disclaimer of warranties under UCC 2-316, allowing the claim to go forward would effectively allow the contract to be rewritten and the UCC to be circumvented. Hoffman v Chapman (425) 1943 - Ps sold a house on Lot 4 at Kensington, on which D lived after the agreement was made, but the draftsperson accidentally made up a deed conferring the entire lot, not just Lot 4. Ps sued in equity to have the deed modified. Should parole evidence be excluded from modifying the written agreement? Held No; fraud, accident and mistake are exceptions to the parol rule. Is the agreement so vague that the contract must be void? Held No, a contract must be upheld if by its express terms or implications the intent of the parties can be determined. Here, there was no mistake between the parties as to the identity of the property, there was only an incorrect description. Is there unilateral negligence on the part of plaintiffs that would allow the defendants to keep the land? Held: No, mere mistake does not necessarily indicate negligence, and the error of the draftperson modified the agreement to contradict the understanding of both parties, so it was not a unilateral mistake. 2. INTERPRETING THE PROMISE WWW Associates v Giancontieri (431) 1990 - K contained a reciprocal cancellation provision. Extrinsic evidence cant be considered in order to create an ambiguity in written agreement; Before such evidence can be considered, court must find an ambiguity in the written K. Pacific Gas & Elec. Co. v GW Thomas Drayage & Rigging Co. (434) 1968- Defendant contracted to fix plaintiff's steam turbine, and the contract indemnified and insured the plaintiff against damage to property. Defendant damaged plaintiff's turbine during the work and plaintiff sued defendant. Defendant claimed the contract only referred to the property of third parties. Is the contract unambiguous on its face to disallow extrinsic information of the circumstances surrounding the contract? Held No. Even though extrinsic evidence may not be used if a contract is unambiguous, that extrinsic evidence of circumstances may be used to determine if the words of the contract actually are ambiguous. Columbia Nitrogen Corp v Royster (437) 1971 A finding of ambiguity is not necessary for the admission of extrinsic evidence of the usage of the trade or the parties course of dealing. UCC 2-202. Final Written Expression: Parol or Extrinsic Evidence. Terms with respect to which the confirmatory memoranda of the parties agree or which are otherwise set forth in a writing intended by the parties as a final expression of their agreement with respect to such terms as are included therein may not be contradicted by evidence of any prior agreement or of a contemporaneous oral agreement but may be explained or supplemented (a) by course of dealing or usage of trade (Section 1205) or by course of performance (Section 2-208); and (b) by evidence of consistent additional terms unless the court finds the writing to have been intended also as a complete and exclusive statement of the terms of the agreement . Robert Indus v Spence (438) 1973- A contract is to be read in the light of the circumstances of its execution, which may enable the court to see that the words are really ambiguous. Federal Dep. Ins. Corp v W.R. Grace & Co (439) 1989 language is not rendered ambiguous merely because parties disagree on its meaning. A self-serving offer to show that a party did not understand the contract to mean what it appears to say will NOT suffice; an offer to show that anybody who understood the context of the contract would realize it couldnt mean what an untutored reader would supposed it meant WILL suffice. Spaulding v Morse (439) 1947 - Trust created- obligated D to pay yearly sum to pay for sons educational expenses until sons entrance into a university, and then a higher yearly fee for 4 years. Once son graduates high school, he is drafted D stops paying Held D does not have to keep paying; even though a literal reading would show that the payments are supposed to continue until entrance into a university, as the main purpose of these funds was to pay for education, the proper interpretation is that D should not have to keep paying while the son is in the army, ignoring the literal language.

R2C 212 Interpretation of Integrated Agreement (2) A question of interpretation of an IA is to be determined by the trier of fact if it depends on the credibility of extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence. Otherwise, a question of interpretation of an integrated agreement is to be determined as a question of law. Frigaliment Importing co. v BNS International Sales Corp (441) 1960 - P and D contracted for D to sell large amount of chicken to P there are young chickens and old chickens; P says chicken means young chicken; D says it means any chicken. Held D wins, it means any chicken. Reasoning: D was new to industry, didnt know trade usage of chicken to be young chicken; witnesses were unreliable; market price favored Ds argument; actions by P after first shipments of chickens that made it seem OK for D to ship more old chickens. (P sues, so P has burden of proof - If D had sued, D would have had burden of proof, the case may have come out the other way this is not good grounds for an opinion) 3. CONTRACTS WITHOUT BARGAINING Livingstone v Evans (447) 1925 - D offered to sell land to P for $1800. P wired back to send the lowest price, offering to pay $1600. D wired back that he could not lower the price. P then accepted the original offer, but D had already sold the land. Held There is an enforceable contract. Even though the counter-offer by P amounts to a rejection (even though it was attached to an inquiry), D's specifically standing by the original price amounts to a reinstatement of the original offer. OLD UCC 2-207. Additional Terms in Acceptance or Confirmation. (use for exch. of printed forms) (1) A definite and seasonable expression of acceptance or a written confirmation which is sent within a reasonable time operates as an acceptance even though it states terms additional to or different from those offered or agreed upon, unless acceptance is expressly made conditional on assent to the additional or different terms. (2) The additional terms are to be construed as proposals for addition to the contract. Between merchants such terms become part of the contract unless: (a) the offer expressly limits acceptance to the terms of the offer; (b) they materially alter it; or (c) notification of objection to them has already been given or is given within a reasonable time after notice of them is received. (3) Conduct by both parties which recognizes the existence of a contract is sufficient to establish a contract for sale although the writings of the parties do not otherwise establish a contract. In such case the terms of the particular contract consist of those terms on which the writings of the parties agree, together with any supplementary terms incorporated under any other provisions of this Act. NEW UCC 2-207 Terms of Contract; Effect of Confirmation- Subject to 2-202, if (i) conduct by both parties recognizes the existence of a contract although records do not establish a contract, (ii) a contract is formed by an offer and acceptance, or (iii) a contract formed in any manner is confirmed by a record that contains terms additional to or different from those in the contract being confirmed, the terms of the contract are (a) terms that appear in the records of both parties, (b) terms, whether in a record or not, to which both parties agree, and (c)terms supplied or incorporated under any provision of this Act. Richardson v Union Carbide Indus Gases Inc. (452) 2002- Two parties exchange documents with conflicting indemnity clauses. Three approaches to conflicting terms. 1) Majority position is that the conflicting terms fall out and are replaced with UCC terms. 2) Minority view: Offerors terms control. 3) Terms of the offer prevail over the different terms of the acceptance only if the latter are materially different, this is the least common approach. Held: This court sides with the majority knockout rule. Old 207-2: counterform with different indemnity clause materially altered first form so it wasnt valid. Old 207-3: Parties acted like there was a contract for a long time, so there was a contract as far as terms on which the parties agreed; they didnt agree on indemnity so it wasnt part of contract. ProCD Inc v Zeidenberg (458) - 1996 D bought database from P and made it available online for less than P charged. There was a license, readable only by opening product, which prohibited this use of the product. D said license wasnt enforceable b/c it wasnt visible on outside of package. Held: Shrink-wrap licenses are enforceable unless their terms are objectionable on grounds applicable to

contracts in general. We treat licenses as ordinary contracts accompanying the sale of contracts and are therefore governed by common law of contracts and UCC. Also, buyer could have returned product w/o using it; had opportunity to reject, and did not. Hill v Gateway 2000 (463) 1997 computer arrives with warranty saying its terms govern unless computer returned within 30 days. Held: this is valid. Even though Ps didnt read terms, it is still valid because they could have. a contract need not be read to be effective. R2C 69 Acceptance by Silence or Exercise of Dominion (1) where an offeree fails to reply to an offer, his silence and inaction operate as an acceptance only when (a) an offeree takes the benefit of offered services w/ reasonable opportunity to reject them and reason to know that they were offered with the expectation of compensation; (b) the offeror has stated or has given the offeree reason to understand that assent may be manifested by silence or inaction, and the offeree in remaining silent and inactive intends to accept the offer; (c) where because of previous dealings or otherwise, it is reasonable that the offeree should notify the offeror if he does not intend to accept. (2) (probably irrelevant, see p 467) Hobbs v Massasoit Whip co. (467) 1893 - P sent D eel skins; D never paid, never gave notice that he didnt intent to accept the skins. Held: D must pay for skins they had done business this way before related UNSOLICITED GOODS many states say that these are treated as gifts, with no obligation on part of recipient to pay Martin v Little, Brown & Co. (471) 1981- P tipped D to plagiarism of Ds book, offered to send copy of infringing book; D accepted offer. When P learned D was pursuing lawsuit, he filed suit to get 1/3 of the recovery. Held no compensation should be awarded his offer was a gift, unsolicited. as a general rule, volunteers have no right to restitution (lots of good language in this case) Collins v Lewis P boards Ds cows for 38 days, then D sells them. Held D owes P; D knew P was boarding cows, and he got a benefit by Ps actions, and by Ds letting P board cows. Seaview assn of Fire Island v Williams D owned homes in town for which P was HOA. D didnt pay any fees under widely known assessment policy, where fees went toward towns operating expenses. Held D had sufficient notice of the arrangement and had to pay; they benefitted knowingly from Ps services. Morone v Morone (477) 1980 - An unmarried couple had been living together since 1952, with the woman performing "domestic duties and business services", expecting to be paid for her services. The man, moreover, orally told her that he would in return take care of her and share the net profits of his business with her. -Can there be an implicit contract between an unmarried couple living together? Held No, because if people are living together there is oftentimes an assumption that work will be performed gratuitously. Allowing implied contracts raises the risk of misunderstanding and allows for fraud. -Can there be an explicit contract between unmarried people living together? Held Yes; nothing about living together precludes an explicit agreement from being put into place, as long as sexual services doesn't form part of the consideration. 4. MISTAKE, MISREPRESENTATION, WARRANTY, AND NONDISCLOSURE Laidlaw v Organ (482) 1817 - D knows of end of War of 1812 when he makes contract to buy tobacco (knowing that this end of the war will raise prices) P, other side of the deal, does not have this info. Holding: D was under no duty to disclose this information to P. D didnt give him false information, or lead him to believe the information didnt exist, he just didnt reveal it. BUT: Jackson v Seymour (483) 1952 - Someone came and looked at D's 31 acres of land and they discussed $275 for it, but didn't strike a deal. Later D needed money, so she went to her next-door brother P, to whom she was close, and he bought the land, which she had never seen, for $275. Later he found out it had $2000 of timber, which he cut and sold. Held The contract should be rescinded because of constructive fraud. There was inadequate consideration, a confidential relationship of the parties (not at arm's length), the vendor was in pecuniary distress, and there was a mutual mistake. The law therefore declares the contract fraudulent because of its deception, without any moral guilt of the

fraud feasor. If there had been intent to defraud, there would have been actual fraud. Inadequacy of consideration in itself is not enoughit's important that the two were not dealing at arm's length. Sherwood v Walker (490) 1887 - P buys cow, presumed barren, from D. While the cow is being held for P to pick up, it is shown to be pregnant, and D refuses to take the money or deliver. P sues. Held: This is a mistake of the nature of a thing, because a barren cow is substantially different from a breeding one, and parties would not have made the contract except for the fact that the cow was barren. The jury should have been instructed that if the contract was based on the assumption that the cow was barren, and she was not barren, the D should have a right to rescind. The DEGREE of mistake is important the difference between a barren cow and a fertile cow was enough that it cut to the whole substance of the agreement Beachcomber Coins v Boskett (496) 1979 - If both parties know that there is a possibility that a fact may not be true, this uncertainty is reflected in the contract, which cannot be rescinded if it turns out that the fact was, in fact, not true. (restatement 502) Elsinore Union Elementary School Dist. V Kastorff (500) 1960 - D made honest clerical error in submitting bid to P school, but total included no allowance for plumbing. P accepted his bid, the lowest, and asked if it was correct; he conferred with his clerk in the hall and reported that it was. The day after his bid was accepted, defendant informed the school board of the mistake, but it voted to hold him to the amount. Held The contract may be rescinded because of a clerical error. The amount given without plumbing costs was unintended by D and unexpected by the P, as P expected the bid to include plumbing. Held D's error was not through negligence, even though he conferred in the hall and replied that that the figure was correct, because he had not yet had time to go examine his paperwork. this is a UNILATERAL mistake, not a bilateral one only D was mistaken; Unilateral mistake is tolerated here because the mistake was corrected (or attempted to be corrected) quickly (School district, at the time of acceptance of BID, did not know or have reason to know that the contract was mistaken) No injury, really, has been done to the school district; he asked to be released almost immediately, and they voted not to release him (injury, if anything, was loss of expectation) (further contract wasnt binding until it was signed) However: if school, in expectation of saving $10k, immediately went and spend $10k on band uniforms, which they wouldnt have done anyway, THEN Kastorff would be liable Tribe v Peterson (508) 1998 - P purchased his first horse from Ds. P asserted that Ds expressly guaranteed that horse would never buck and brought suit for breach of warranty when the horse bucked him from the saddle, shattering his left wrist. Ds said they guaranteed no such thing. P lost a jury trial on his claims. Held: D wins - "In order for an express warranty to exist, there must be some positive and unequivocal statement concerning the thing sold which is relied on by the buyer and which is understood to be an assertion concerning the items sold and not an opinion. . . . A representation which expresses the seller's opinion, belief, judgment or estimate does not constitute an express warranty." Hinson v Jefferson (511) 1975 - P purchased land from D, where both parties understood the purpose of the purchase was to construct a residence there, as the deed gave restrictions on the type of residence. Before construction health officials discovered that the area was subject to flooding and denied plaintiff a deed for a septic system, making the property worthless for the intended use. Held A contract can be rescinded through break of implied warranty when the object in question is not fit for the intended purpose, and that shortcoming was not known by either party and could not have been discovered through a reasonable inspection. This is an exception to caveat emptor. Although previous mutual mistake cases were really "embryo implied warranty cases," the circumstances go beyond a mere mistake to address the implied usability of the object for some purpose. Johnson v Healy (517) 1978 - P bought a one-family house from D builder, who said that "there was nothing wrong with it." Over the next few years, damages were done to the sewage system because the foundation was unstable, dating back to an improper fill placed there before D purchased lot. Held A D is liable even for an innocent misrepresentation, extending the developing warranty liability and consistent with trend of limiting caveat emptor. Held The damages should be the cost of the repairs.

Cushman v Kirby (523) 1987 - Ps bought a house from the Kirbys. At the second time they looked at the house, they saw a water treatment system in the basement and asked about the water. Mrs. Kirby said that the water was fine, just a little hard. Mr. Kirby was silent. It turns out the water was sulphur water (different from hard water), which smelled and tasted terrible. Treatment would only bring it to a tolerable level of drinking, so Ps paid $5,000 to be connected to city water. Held Mrs. Kirby made a fraudulent misrepresentation because she gave impression that she had made a full disclosure when she did not. Held Mr. Kirby made a fraudulent misrepresentation because he was silent when Mrs. Kirby spoke her misrepresentation, and he as a seller had a duty to the buyers. Held Damages are cost of hooking up to city water, as remedy for fraudulent misrepresentation is the amount that would be needed to bring P level expected had there been no fraud. 5. Changed Circumstances justifying Nonperformance Taylor v Caldwell (529) 1863 - Ps and Ds had a contract by which Ds agreed to let Ps use Surrey Gardens and Music Hall for 4 days for a concert for 100 pounds a day. Parties inaccurately call it a letting and a rent, but Ds maintain possession, and contract was just to give P the use of it on those days. The existence of the music hall, in a state fit for concert, is essential for fulfillment of the contract. It burns down. Held: When entering into the contract both parties must have contemplated buildings continued existence. In the absence of any express or implied warranties the parties should be excused if performance is impossible. (If person has contract to write a book, and they die, their heirs are not required to finish the book) Tompkins v Dudley (532) 1862 - P trustees of a school district sued D, who had promised to build a school house, for the money they had advanced him. D had promised to have the building finished by 1 October 1857, but by then he had about $60 worth of work left, including some painting and some window hanging. On 5 October 1857 the schoolhouse burned down, before acceptance by Ps and before delivery of the key. Held D is liable for the structure. When someone contracts to perform, they are not liable if an unforeseeable catastrophe makes performance impossible, unless, as is here, they unconditionally agree to perform by a certain date. The liability should lie on the person who had taken responsibility for it. Or: Rule of Law and Holding: When a party is prevented by the act of God from discharging a duty created by the law, he is excused; but when he engages unconditionally, by express contract, to do an act, performance is not excused by inevitable accident or other unforeseen contingency not within his control. (Contractor is in better position to deal with risk of fire; he is in control of property in the way that owner is not) Garman v. Hoover (534) 1928 - Ps agreed to build a house for Ds for $8,300, and the partially completed house burned down after $5,600 in progress payments had been made. Ds had an insurance policy for $8,000 on the house and collected $5,609.10. Ps spent $7,968.59 building another house for D, and sued for the contract price without deducting the $5,600 progress payments. Held D should deduct the progress payments, as they were not payments for successive stages but instead advance payments for the completed house. Carroll v Bowersock (535) 1917 - P contracted to put in a new reinforced concrete floor in Ds warehouse. After P removed the old floor, put in concrete footings, built wooden forms for building a concrete support, and installed reinforcing rods, the warehouse burned down without fault to either party. Held P is due payment for the work according to the contract that benefitted the Drestitution which includes cutting the old floor away and the completed concrete footings. P cannot recover parts/labor for construction of the columns/forms, because these were temporary structures that did not give benefit to D. R2C 264 Prevention by Government Regulation or Order If the performance of a duty is made impracticable by having to comply with a domestic or foreign governmental regulation or order, that regulation or order is an event the non-occurrence of which was a basic assumption on which the contract was made. Louisville & Nashville R.R. Co. v. Crowe (543) 1913 - P gave railway a strip of land through his farm in return for annual rail passes between Kentucky and Tennessee for the rest of his life. When the Supreme Court outlawed such passes, the railroad would only give P some free trips between

lines and denied further liability. Held: The equitable thing to do would not be to give the land back, because of public interest reasons, but to require RR to pay P for the value of the annual tickets, taking into account the rides P has already taken. Isle of Mull (543) 1921 - The Isles Steamship Co., a British corporation, chartered the steamship The Isle of Mull for five years to P for GBP 1350/month. The British government assumed control of the steamship for the war, and paid the owner around GBP 2361/month. Is the P owed the difference? Held No, when the government took control of the vessel, the contract was "wholly discharged," and the owner gets the profit just as the owner would have had to live with any loss. Kel Kim Corp. v. Central Markets, Inc (543) - 1987 - P leased a supermarket from Ds for 10 years with two 5-year renewal options. The contract said that P would maintain $500,000 single-person insurance and $1 million per-accident insurance. The contract contained a force majeure clause that excused performance "by reason of labor disputes, inability to procure materials, failure of utility service, restrictive governmental laws or regulations, riots, insurrection, war, adverse weather, war, Acts of God, or other similar causes beyond the control of such party ...." The insurance carrier gave P notice that it wouldn't renew insurance coverage, and P was unable to find alternate insurance. Ds gave notice of default and ordered P to vacate the premises within 30 days. Should P be excused from performance because of impossibility? Held No, impossibility is a narrow defense regarding the destruction of the object of the contract. P should have made allowance to find insurance. Should P be excused from performance because of force majeure (clauses excusing nonperformance due to circumstances beyond the control of parties)? Held No, force majeure clauses should be narrowly interpreted, and losing insurance is substantially different than the kinds of day-to-day commercial operations listed. Bunge Corp. v Recker (545) 1975 D farmer made an agreement, one of a series of agreements, with P for 10,000 bushels of No. 2 yellow soybeans for $3.35/bushel. The contract was for any soybeans, as long as they were grown in the continental US. Severe winter weather struck Missouri, and in January, when the market price for beans were $4.98, P visited D and saw that the beans in the field could not be harvested. P extended the deadline until April, at which time the price of beans was up to $5.50. Held D cannot claim a UCC 2-613 act of God defense, because the contract was for any old beans, not the particular ones damaged in the field. Held The defendant might be able to reduce damages by fixing the breach date in January and using the lower bean market price, claiming that the plaintiff had extended the due date in bad faith under UCC 2613, but D would have to raise that defense and it would have to be triedthe damages cannot be reduced if the bad faith defense has not been raised and tried. (why the different result in Snipe?) Snipes Mountain Co v Benz Bros (547) 1931 - P grower contracted to sell 100 tons of potatoes, it being understood that they were being grown by P. Natural causes caused a small yield, and P could only deliver 64 tons. P sued for payment of the 64 tons, and D counterclaimed for damages for the undelivered 36 tons. Held P is excused from producing the 36 tons, because there was an implied condition in the contract that P would be able to produce all 100 tons. As this was understood by both parties, the contract can be modified to specify, "potatoes grown on the following described premises." Everybody involved in contract contemplated that all of the potatoes would be grown by P; the fact that this wasnt included in the contract was MUTUAL MISTAKE. American Trading & Prod. Corp. v. Shell Int'l Marine, Ltd. (548) 1972 - D chartered Ps vessel to transport cargo from Texas to India for ~$400,000, which was calculated based on the American Tanker Rate Schedule (ATRS) for transport through the Suez Canal. Because of war the Suez Canal was closed, forcing the vessel to navigate the Cape of Good Hope, arriving in India 30 days late and taking a trip twice as many miles. P sued D for an extra ~$130,000. Held The closing of the Suez Canal does not provide an excuse of impossibility, because the contract did not stipulate an exclusive route, and the price calculation at most indicated that the Suez Canal was the most probable route.

Held There is no excuse of commercial impracticability (Restatement 454 (1932)), because the extra costs incurred were only 1/3 of the total price. The alternate route was well recognized. Moreover, the captain knew of instability in region far enough in advance to have diverted and avoided some expenses. Krell v. Henry (555) 1903 -P advertised a room with windows perfect for viewing the King's procession, and D came and looked at the room and asked the housekeeper about it. In letters, Henry agreed to rent the room for GBP 75 for two days (not the nights). The King fell ill and did not process, so P sued for the GBP 50 balance and D counter-claimed for his GBP 25 deposit. Held If it appears that a contract depended on the existence of something, the contract shall be considered to have an implied contract regarding the existence of the thing. Allowing parole evidence to be introduced, it's clear that the King's procession was the foundation of the contract, even though the letters making up the contract didn't state that. The criteria are: 1) The thing was the foundation of the contract. 2) The thing was prevented. 3) The event preventing the thing was unforeseen. -how do we know the room was to be rented for the procession? Because the price was outrageous. (contract signed on 20th; king falls ill on 22nd; procession canceled on 23rd; was supposed to be on the 24th -why not modify contract so that buyer is bound for next coronation? -too uncertain not sure when it will be. Plaintiff may not be out of town for the next coronation. Lloyd v. Murphy (560) 1944- On August 4, 1941, Ps leased to D for five years land on which to sell new automobiles, do repairs, and sell gasoline. In early 1942 the government ordered a hold on new car sales, then allowed limited sales using a system of priorities. D, who continued selling new cars elsewhere, breached the contract claiming commercial frustration, in which "Performance remains possible but the expected value of performance to the party seeking to be excused has been destroyed by a fortuitous event, which supervenes to cause an actual but not literal failure of consideration...." Held There was no commercial frustration. 2 requirements for commercial frustration 1) The risk of the frustrating event must be reasonably unforeseeable (as the purpose of a contract is to give a businessman some certainty), but here the risk of war and the government's previous actions made new car sale restrictions foreseeable. 2) The value of the lease has not been destroyed, because the sale of automobiles have not been made impossible, only restricted. Defendant, after all, continues to sell automobiles on other property. Weyerhaeuser Real Estate Co. v. Stoneway Concrete, Inc. (561) 1981 - P leased mineral rights to D for nine years to strip mining of sand and gravel. The contract said that payment would be made even if D didn't get any minerals from the land, and required a one-year notice before termination even if getting minerals from the land became uneconomical. Both parties expected up to a two-year wait to obtain permits, but because of an unexpected public outcry over the environmental effects of strip mining the permits were not granted after five years. Held D may break the lease because there was frustration of purpose. While both parties expected a slight delay, it was totally unexpected that permits would be impossible to obtain. Dissent It doesn't make sense to say that it's expected that permits be difficult to obtain, yet say that it's unexpected that permits would be impossible to obtain. Chase Precast Corp. v. John J. Paonessa Co. (562) 1991 - State of MA, through the department of public works (DPW), hired D to install concrete barriers in place of a grass median. D contracted with P to supply the concrete barriers. The DPW/D contract contained a standard provision allowing the department to eliminate portions of work it found unnecessary. The D/P contract held no such provision. After a public outcry against the project, D stopped work amid frustration of purpose (commercial impractibility) in which "a party's principal purpose is substantially frustrated without his fault" by the occurrence of some event removing a basic assumption on which the contract was made, under Restatement (Second) of Contracts 265 (1981). P sued for anticipated profit. Held D is relieved of further performance because the circumstances were unforeseen and D didn't take on the risk of a reduction in the quantity of barriers. Even though there was no clause in the D/P contract removing assumption of risk from D, P had supplied barriers before and knew about the

standard clause as was in the DPW/D contract, and about the "Unit Price Philosophy" in the construction industry which only the quantity of work actually accepted is paid for. R2C 265 Frustration of Purpose Where, after a K is made, a partys principal purpose is substantially frustrated without his fault by the occurrence of an event, the non-occurrence of which was a basic assumption on which the K was made, his remaining duties to render performance are discharged, unless the language/circumstances indicate the contrary. V. Policing the Bargain 1. Competency and Other Limits not discussed in class 2. DURESS AND COERCIVE RENEGOTIATION Batsakis v. Demotsis (591) 1949 - D, in Greece during WWII, needed money so she asked P for 500,000 drachmas (US$25 at the time), and she signed a contract with P saying he had given her US$2,000 and that she would pay back US$2,000 with 8% per annum interest. Must D abide by the $2,000 plus interest in the contract even though P only loaned her the equivalent of $25? Held Yes; inadequacy of consideration does not void a contract. In effect, P paid D $25 to sign saying she owed him $2000, and the document in that agreement amounts to valuable consideration. Embola v. Tuppela (594) 1923 - D's $500,000 Alaskan gold mine was sold by his guardian while he was insane. He told the P, after loaning him $270, that if he would loan D $50 more, if he won his mine back in court he would give plaintiff $10,000. After winning back his mine, Tuppela (apparently incompetent again) asked his trustee to pay P the money. Was the contract unconscionable because of the disparity of sums? Held No; D was of a sound mind at the time and considered the contract fair and to his advantage. The uncertainty of the payback event supports the adequacy of the consideration. (like a lottery ticket) Alaska Packers' Ass'n v. Domenico (601) 1902 - A group of fishers contracted to work on a ship for the season, some for $50 and some for $60 (plus more for each fish caught). Out at sea, they got together and demanded $100 or they would stop working and return to San Francisco. As the company had invested a lot of money into the enterprise, and there was no way to get other workers in time, the superintendent signed a new contract with them, while stating that he had no authority to do so. Is there valid consideration for a new contract with a higher price for work someone is already obligated to do, if the contract is made in the presence of necessity? Held No. One cannot introduce consideration by one's own wrong of refusing to perform on a contract. The new contract cannot be legally enforced, even if the party requesting better terms relied on the new contract, because that would allow that party to profit from breach of the first contract. Schwartzreich v. Bauman-Basch, Inc. (605) 1921- P was a coat designer for D making $90/week. P got an offer for $110/week and told D, who said that he would raise his pay to $100/week if he would stay, because he had to get a sample line on the road soon. They tore up the old contract and made a new one. D later discharged P, who sued. Is the second contract enforceable? Held Yes. Two parties can mutually rescind a contract and make another one, even at the same time. Once the first contract is rescinded, their mutual promises provide consideration for the second contract. [Later decisions have upheld the result but not the reasoning, deciding that rescinding and creating a new contract cannot occur at the same time if the second has better terms to one party, because that raises doubt as to the mutuality of the rescission, and the rescission of the first and the creation of the second circularly rely on each other.] Austin Instrument, Inc. v. Loral Corp. (606) 1971 - The Navy contracted with D for $6 million for production of radar sets, so D subcontracted to P for parts. D was awarded another Navy contract and solicited more bids, and selected P for some of the 40 parts. P then said that, unless D would accept increased prices for the first subcontract and assign all 40 parts to P for the second subcontract, it would cease production. D checked all its other suppliers and no one could even start supplying in time, and the Navy's contract had all sorts of sanctions for late delivery, so D agreed. Three days after the last shipment from P, D filed an action to recoup the raised prices on a theory of duress.

Held This is a classic case of duress. D couldn't renounce the P contract because it needed the parts for the Navy contract, and couldn't get them elsewhere. It was justified in waiting to file suit because of the likelihood that P would again cease production. Dissent The Appellate division already determined that there was no damage to D, so this court should not change that factual decision. D also should have checked other suppliers in addition to the ones with which it was familiar. Smithwick v. Whitley (609) 1910- duress exists only where the unlawful act of another has deprived one of free will. Wolf v Marlton Corp (609) 1959- Duress is tested, not by the nature of the threats, but rather by the state of mind induced thereby in the victim. R2C 89 Things not anticipated A promise modifying a duty under a contract not fully performed on either side is binding (a) if the modification is fair and equitable in view of circumstances not anticpated by the parties when the contract was made; or (b) to the extent provided by statute; or (c) to the extent that justice requires enforcement in view of material change of position in reliance on the promise. Hackley (D) v. Headley (P) (623) 1881- P hired D to cut logs and take them to the river. When it came time for D to pay P ~$6000, D disputed the measurement standard used and said he would only pay P $4000. P would have been financially ruined had he not taken the money, so he said he would sue D but took the money and gave D a receipt. Has duress occurred if the leverage of the compromise depends on the particular circumstances of the plaintiff? Held No. Duress is when "one by the unlawful act of another is induced to make a contract or perform some act under circumstances which deprive him of the exercise of free will." duress is determined solely by the actions of the D. Here D had nothing to do with P's dire financial condition, and not paying the full amount on time would have not been duress had P been financially well off. (It's not duress if the one doing the threatening has a right to perform the action.) [P sued again and won, saying instead of duress that D tried to pay less than he knew he owed.] BUT SEE Capps v. Georgia Pacific Corp. (625) 1969- P found a lessee for D's land and was owed ~$150,000 (5% of the lease price). D only paid P $5,000 and, since P would have received nothing, gave a receipt for the $5,000. Held Duress exists when a threat depends on the financial condition of the plaintiff, reversing the holding in Hackley v. Headley. Concur If one party induces another to make a deal based upon the other party's dire financial conditions, many business transactions might be subject to a charge of duress. It would be better to simply say that a receipt for a payment less than what it's acknowledged is owed is invalid without consideration. Marton Remodeling v. Jensen (627) 1985 - D hired P to remodel his house on a "time and materials" basis. D claimed the resulting total of ~$6500 was too expensive and sent a $5000 check with "...full and final satisfaction of ... claims ..." written on it. P responded that the amount was not enough, but then wrote "not full payment" below and cashed the check. Held The check was an accord and satisfaction as it was noted "paid in full" and covered a single, unliquidated claim that was a bona fide dispute. Held One cannot get around an accord and satisfaction by writing "not full payment" on the check, because the law favors an accord and satisfaction as a means of compromise and if a creditor can reserve rights on an accord and satisfaction, it would decrease its utility. UCC 3-311. ACCORD AND SATISFACTION BY USE OF INSTRUMENT. (a) If a person against whom a claim is asserted proves that (i) that person in good faith tendered an instrument to the claimant as full satisfaction of the claim, (ii) the amount of the claim was unliquidated or subject to a bona fide dispute, and (iii) the claimant obtained payment of the instrument, the following subsections apply. (b) Unless subsection (c) applies, the claim is discharged if the person against whom the claim is asserted proves that the instrument or an accompanying written communication contained a conspicuous statement to the effect that the instrument was tendered as full satisfaction of the claim.

(c) Subject to subsection (d), a claim is not discharged under subsection (b) if either of the following applies: o (1) The claimant, if an organization, proves that (i) within a reasonable time before the tender, the claimant sent a conspicuous statement to the person against whom the claim is asserted that communications concerning disputed debts, including an instrument tendered as full satisfaction of a debt, are to be sent to a designated person, office, or place, and (ii) the instrument or accompanying communication was not received by that designated person, office, or place. o (2) The claimant, whether or not an organization, proves that within 90 days after payment of the instrument, the claimant tendered repayment of the amount of the instrument to the person against whom the claim is asserted. This paragraph does not apply if the claimant is an organization that sent a statement complying with paragraph (1)(i). (d) A claim is discharged if the person against whom the claim is asserted proves that within a reasonable time before collection of the instrument was initiated, the claimant, or an agent of the claimant having direct responsibility with respect to the disputed obligation, knew that the instrument was tendered in full satisfaction of the claim. Denney v. Reppert (634) 1968 - Facts: Some guys robbed a bank. The bank put out a $500 reward for the capture of each robber. The robbers got caught, and a whole bunch of people fought over who should get the money. The robbers were apprehended by three cops. They were helped by the bank employees because they disclosed a lot of important details about the crime. There were also the Reynoldses, who also gave some information. The Bankers Association asked the court to determine who should get the reward. The people who didnt get the reward appealed. The issue was who was entitled to the reward? Rule: When a reward is offered for performing some act, anyone can collect it except someone acting within the scope of their employment or official duties. Analysis: The court finds that the bank employees were basically just doing their jobs, so they get nothing. Two of the officers dont get anything because they were also just doing their job within their own jurisdiction. But Reppert wins out because he was making an arrest that he wasnt bound to make as part of his official duties. 3. Scrutiny of Limited Commitment Sheets v. Teddy's Frosted Foods, Inc. (640) 1980 - D had hired P indefinitely as a quality control director. P alerted D to substandard quality of frozen food products that violated the Connecticut Uniform Food, Drug and Cosmetic Act, and in return D fired P. Should D's motion for strike based upon insufficient complaint be sustained? Held No; Although contracts terminable at will do not require a showing of just cause, an employer can be "responsible for damages in tort for a demonstrably improper reason for dismissal, a reason whose impropriety is derived from some important violation of public policy." The employee's job and expertise was to check quality, so the employer can't make him choose between termination and criminal sanction. McDonald v. Mobil Coal Producing, Inc. (646) 1991- McDonald was terminated from Mobil, and he sued alleging that the employee handbook, which indicated that open communication was better than unionizing, overrode the original at-will contract. The handbook contained a welcome letter that indicated that its contents would be in effect until changed, and also contained the sentence, "It is not a comprehensive policies and procedures manual, nor an employment contract." Held (The "nor an employment contract" disclaimer was not conspicuous, so it isn't valid.) "Mobil's subjective 'intent' to contract is irrelevant, if Mobil's intentional, objective manifestations to McDonald indicated assent to a contractual relationship." Whether the objective manifestations of assent were sufficient is a mixed question of law and fact that must be determined through further proceedings. Kari v. General Motors Corp. (652) 1977 - An employee handbook talked about severance pay but stated in two sections that the handbook did not constitute a contract. Held The handbook was not a contract as it contained no promise and no expectations of the employee to perform so as to rely on the promise. There's hardly any way the defendant could have indicated more that this was not a contract other than by not mentioning the severance plan.

Dore v Arnold Worldwide (653) 2006- Employment contract specifying 'at will' employment did not create relationship terminable only for cause; there was no implied-in-fact contract providing that he would only be terminated for cause 4. Standardized Terms, Unconscionable Inequality, and Good Faith Weisz v Parke-Bernet Galleries (658) 1971 - Weisz and Schwartz bought paintings purportedly by Raoul Dufy for ~$3,000 and ~$9,000, respectively, and then found out they were fakes. Ds catalog contained a disclaimer stating that, although attempts had been made to verify authenticity, there was no warranty of such. The auctioneer also announced the disclaimer at the start of the auction. Held Weisz was not held to the disclaimer, because he didn't know about it. Held The Schwartz' are not bound by the disclaimer, because even though they knew about it the reputation of Park-Bernet and the form of the catalog gave an air of authenticity and implied that warnings should be taken lightly. [The judgment for Weisz was reversed because the display in the catalog was prominent and auctions have in general an implication of caveat emptor.] Henningsen v. Bloomfield Motors, Inc. (664) 1960 - P purchased a new car from D. At ten days and 468 miles the steering wheel spun while Ps wife was driving and the car was totalled. The sales contract contained, in small print, a merger clause and a paragraph limiting the warranty to replacement of defective parts to 90 days or 4,000 miles, whichever was shorter. They sued to recover for personal injuries, and Bloomfield said that the warranty disclaimer precluded suits for personal injury. Is the warranty disclaimer valid? Held No, warranty disclaimer is not valid. 1) The disclaimer was in a small font in the midst of other text that made it hard to find, and there is no evidence that the plaintiff ever read it. 2) As public policy, the dealership had unequal bargaining power in relation to the customer, so the warranty wasn't really bargained forthe salesperson didn't have the authority to change the clause if he would have wanted to. 3) Even if the warranty disclaimer were valid, it was ambiguous to a normal person because it made it seem like it was only limiting a warranty for parts, not for personal liability. Richards v. Richards (671) - 1994 Mrs. Richards wanted to ride with her husband as he drove a truck for Monkem Co. They said that she could if she would sign a "Passenger Authorization" form that authorized her to ride in a particular vehicle, as well as purported to release Monkem from liability from any future injury in any Monkem vehicle or on any Monkem property. Mr. Richards had an accident, pinning Mrs. Richards in the truck, so she sued. Is the exculpatory contract valid? Held No, the exculpatory contract is void as against public policy. The point of tort law is to compensate people for their injuries and provide a deterrance for harmful behavior. Courts disfavor exculpatory contracts but do not categorically deny them. This contract had three problems, none of which alone would have invalidated the contract: 1) the exculpatory purpose is not evident from the title of the agreement; 2) the release is overly broad and all-inclusive, allowing riding in one vehicle but relieving liability for all vehicles;, and 3) it is a standardized form that did not give plaintiff any room to negotiate terms. Broemmer v. Abortion Services of Phoenix (676) 1992 R2C 211 (STANDARDIZED/ ADHESION CONTRACTS) - P was a 21-year-old unmarried high school student who went to get an abortion. The clinic provided her with a consent-to-operate form, a medical history form, and an agreement to arbitrate specifying that the arbitrators would be doctors, all of which the plaintiff filled out within five minutes. No one explained the contents of the form to her. During the operation she suffered a punctured uterus and sued for malpractice. Is the agreement to arbitrate an adhesion contract? Held Moeller: Yes. An adhesion contract is one offered to consumers with no opportunity to bargain without which the consumer cannot get the goods or services. It was offered on a take-it-or-leave-it basis, it was particularly advantageous to the clinic, no one explained the terms or indicated that she could refuse, and the terms were not negotiable. Is the adhesion contract enforceable? Held No. The courts like agreements to arbitrate, as they remove the load on the courts, but only if both parties agree to them. Adhesion contracts are not enforceable if they exceed the reasonable

expectations of the plaintiff or if they are unconscionable. Here it wasn't clear that P was waiving a right to a jury trial, and the high school girl still isn't quite sure what arbitration is. As it was beyond her expectations that the right to jury trial would be denied, the issue of unconscionability need not be addressed. R2C 211 Standardized Agreements- (1) except as stated in (3), where a party to an agreement assents to a writing, and has reason to believe that like writings are typically used, he adopts the writing as an integrated agreement. (2) such a writing is treated, wherever reasonable, as treating everybody equally regardless of their knowledge/understanding of the standard terms in the writing. (3) where the other party has reason to believe that the party manifesting such assent would not do so if he knew that the writing contained a particular term, the term is not part of the agreement. UCC 2-302. Unconscionable contract or Term. (and remedies) (1) If the court as a matter of law finds the contract or any term of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable term, or it may so limit the application of any unconscionable term as to avoid any unconscionable result. (2) If it is claimed or appears to the court that the contract or any term thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose, and effect to aid the court in making the determination. Waters v Min Ltd. (691) 1992 P was injured when she was 12 years old, and she received a settlement with which she bought an annuity contract. She met D Beauchemin, who introduced her to drugs and became romantically involved with her. He convinced her to sell the contract, worth $189,000 in cash or $694,000 at term, for only $50,000 to Ds, who then forgave Beauchemin's debt. P was not represented by legal counsel, although D were. Held The sale was unconscionable, and Ds must repay the annuity with $18,000 interest. Traditionally, unconscionability meant "such as no man in his senses and not under delusion would make on the one hand, and as no honest and fair man would accept on the other." Later it was restated as when "the sum total of its provisions drives too hard a bargain for a court of conscience to assist." Unconscionability is decided on a case-by-case basis, taking into account oppression, unfair surprise, gross disparity in consideration, high pressure sales tactics, and misrepresentation. Here D introduced P to drugs, exhausted her credit cards, initiated negotations, was an agent to the negotiations, and profited from the result. P, unlike Ds, wasn't represented by counsel. The payment was 1/4 the present worth of the annuity. Williams v. Walker-Thomas Furniture Co. (693) 1965 - From 1957-1962 defendant Williams purchased household items from plaintiff on an installment basis, with an "add-on" clause in the contract that until all the sum total of all items were paid for, the plaintiff could repossess all goods previously purchased. Williams purchased a stereo for ~$500, already owing $164 on a prior purchase, and when she defaulted plaintiff tried to repossess all items she had purchased since 1957. D had never had the contract explained to her, and many times had signed the contract without being given a copy. Held The contract was unconscionable. The court can find purchases unconscionable (both under common law and under the UCC 2-302) if there is 1) a lack of meaningful choice on the part of one party and 2) contract terms that are unreasonably favorable to the other party. Reasonableness and fairness are determined in light of the circumstances existing when the contract was made. Brower v. Gateway 2000 Inc. (700) 1998 - Gateway includes standard terms and conditions with computer which are binding 30 days after delivery. Dispute resolution provision sets out that all disputes are subject to arbitration at a specific forum. The forum has a high upfront cost ($4000), $2000 of which is non-refundable. P also must bear cost of Gateways legal fees if they dont win. Held: That is unconscionable because it is effectively a complete bar to litigation. Under NY law unconscionability requires a showing that the contract is both procedurally and substantively unconscionable, there must be some showing of an absence of meaningful choice on the part of one of the parties together with contracted terms that are unreasonably favorable to the other.

R2C 205. Duty of Good Faith and Fair Dealing Every contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement. Martin v. Joseph Harris Co. A legally sophisticated seller may not take advantage of a buyers lack of legal expertise about warranties to shift, by cryptic language, the risk of loss for latent undiscoverable defects. Market Street Assocs. Ltd. Partnership v. Frey (708) 1991 - Market Street enters into sale and leaseback arrangement with Frey. They sell and the pension trust leases back for 25 years, Pension Trust must finance costs of expenses for construction and improvements provided the cost is at least $250,000. Pension trust agrees to give reasonable consideration to providing financing, and should negotiations fail Penney can rebuy at the original price sold plus 6%/year. Approached regarding this piece of land, on which a drugstore will lease if Market Street builds them a store, which is customary. They call and ask for the loan, and Frey does not reply. Frey then says well review it and get back to you. Negotiations dont really go anywhere. Market Street rights a letter formally requesting $2 million in funding that does not mention the lease. They are continually unresponsive and dont write back. They send a second letter requesting financing, and the next day they get a letter turning down the original request for financing, because Frey is not interested in making loans for less than $7 million. Market Street then notifies Frey that they are buying back according to contract. Frey refuses to sell, Market Street sues. Held: Posner says that Market Street doesnt need to tell Frey about the contract, as they both have a copy. Good faith doesnt mean you have to be your brothers keeper, especially when your brother is the GE pension trust, whose lofty indifference to small transactions (under or equal to seven million) is the signifier of its grandeur. You dont have to be forthcoming, so long as you dont lie or misrepresent. The dispositive question is were they trying to trick Frey. The only way for that to come out as yes is for you to read facts as favorably as possible to Frey, which we dont because Frey wants summary judgment. VI. The Maturing and Breach of Contract Duties 1. THE INTERDEPENDENCE OF PROMISES Kingston v. Preston (721) 1773 - P contracted with D to work for him for a year and a half, then he would go into partnership with the D's nephew, D would go out of business, P would give security of GBP 250 per month until it reached GBP 4000, and would take over D's business. P worked the said amount of time, and then sued the defendant for not turning over the business. Held Lord Mansfield: The plaintiff must first give the defendant the security. There are three types of agreements: 1) Mutual and independent, where either party may recover damages from the other for injuries from breach. 2) Conditional and dependent, in which the performance of one depends on the prior performance of another. 3) Mutual conditions to be performed at the same time, if one party was ready and offered to perform and the other refused, he who is ready may maintain an action against another Here the giving of the security was a condition precedent to the D handing over the business. (2) R2C 234 - Order of Performances - (1) Where all or part of the performances to be exchanged under an exchange of promises can be rendered simultaneously, they are to that extent due simultaneously unless language or circumstances indicate otherwise. R2C 238 - Effects on Other Parties Duties of A Failure to Offer Performance - Where all or part of performances to be exchanged under an exchange of promises are due simultaneously, it is a condition of each partys duties to render such performance that the other party either render or with manifested present ability to do so, offer performance of his part in a simultaneous exchange. Price v. Van Lint (724) 1941 - D promised to loan P Price $1500 by February 1, 1940 to build on land, and the P in return promised to provide a mortgage to D as security. D placed $134 in P's account so that P could buy the land, and both parties knew that the money would have to go to Amsterdam and it would take a while for the deed to get back. D told other lenders that D would lend the money, so they provided lumber. D decided not to lend the money, so P was delayed in finishing the building and

opening it as a nightclub. Were P's promise to provide a mortgage and D's promise to lend the money independent, and thus there can be no recovery, or dependant, in which case D must loan the money even without the mortgage. Held The loans were independent, and D owes damages for breach for not providing the loan in time. Mutual promises by default should be considered dependent unless language indicates otherwise. But where there are mutual promises to pay money or to provide some act, and the time of performance of one occurs or could occur after the other, they are independent. Here both parties knew that it was likely the deed wouldn't get back from Amsterdam in time to have the mortgage be given to P before the loan was given, so the promises are independent. Held P must pay the $35 cost of the attorney presiding over the substitute loan to P, but not the $46 from the outrageously 60% high-interest loan not anticipated by the parties. D likewise couldn't hvae anticipated the extra $21.30 for roofing materials in installments because of the absence of the lent money. The $5/day loss in profits is speculative and should not be allowed, but the $62.50 in rent lost can be corraborated. Conley v. Pitney Bowles (730) 1994 - P, who worked for D, was injured in an automobile accident. For benefits under the Employee Retirement Income Security Act (ERISA), his employment contract required P to exhaust administrative remedies before suing for denial of disability benefits. The contract also required a written notice of any denial to be sent to P, explaining the exhaustion requirement. The D letter to P did not explain the exhaustion requirement. Is the letter containing an exhaustion requirement a condition precedent to Conley following the exhaustion requirements? Held Yes. When a contract contains multilateral conditions and one is to occur in time before the other, the first is a condition precedent to the other. Here, the denial of benefits letter (listing appeal instructions) would have been sent prior to Conleys exhaustion obligations. Because the letter did not hold up PBs side of the bargain, Conley did not have to hold up his. Does public policy require Conley to exhaust the administrative remedies nonetheless? Held No, the freedom to contract is a more important public policy. Should Conley be held to have been constructively aware of the requirement through the employee handbook? Held Not as far as the summary judgment goes. Bell v. Elder (733) 1989- Ps contracted to purchase land, and the contract said that the seller would supply water, and that Ps would pay a hookup and installation fee. The seller did not supply water, so Ps sued the seller for the down payment even though Ps had not paid the fees. Held Ps may not sue for breach, because they themselves have not performed. As no time was specified for either act, the acts are concurrent promises and a party may not sue for breach by the other party when the first party has not performed. (Conley v PB couldnt start appeals process until after he got the letter; here, either thing could have happened first) R2C 253 Anticipatory Breach (1) where an obligor repudiates a duty before he has commited a breach by non-performance and before he has received all of the agreed exchange for it, his repudiation alone gives rise to a claim for damages by total breach. (2) where performances are to be exchanged under an exchange of promises, one partys repudiation of a duty to render performance discharges the others remaining duties to render performance. (Question: was breach total or partial? How can you tell?) K & G Constr. Co. v. Harris (736) 1960 - D subcontractor contracted to do earth moving for P contractor in a "workmanlike manner", with time of the essence. P was to pay progress payments to D. D would carry insurance. D's bulldozer operator struck the edge of P's house and caused damage amounting to twice one monthly payment. P let D continue work, but when D did not pay for damage, P did not pay progress payments, so D stopped work altogether. P got the work done elsewhere for $450 more. The court held D owed for the damage, and D paid that. Held D owes the $450 for the difference in cost as it totally breached the contract. The promises to do the work and to pay progress payments were dependent. When D did the damage there was a breach, and when P let work continue, P considered the breach partial. When D stopped work, that was a total breach, allowing P to get the work done

elsewhere. Did having insurance mean that D didn't have to pay for the damage? Held No, the insurance company denied liability and having insurance doesn't allow D to perform the work negligently. Stanley Gudyka Sales Co. v. Lacy Forest Products Co. (739) 1990 - D hired P to sell wood products and split the commission. When P owed D $3,000 in commissions, D cancelled the contract even though D owned P $46,000 in commissions. Held D may not use this breach to avoid contractual obligations, because the breach was not proportional to the need and therefore insignificant. D could have used the self-help method of deducting the amount from commission payments. Held Because D knew how much was owed, D was obligated to give notice to P. Ziehen v. Smith (740) 1896 - P contracted to buy land from D. P would give $3500 on 15 September 1892 and D would give P the mortgage. There was another mortgage on the property of which neither knew on the day of performance, but that later came to light. P sued D for not being able to hand over the mortgage. Held The plaintiff cannot maintain an action because, for this concurrent promise, the plaintiff did not perform or demand performance of the other party. This requirement would not be in effect if it were obvious that the other party could not perform on that day, but here neither party knew of the other mortgage on the day of performance. If the buyer had demanded performance, maybe the seller could/would have performed. DIVISIBLE CONTRACTS Stewart v Newbury (745) 1917 - P gave an estimate for building a concrete mill building for Newbury, but there is dispute over when payments were to be made: Ds claim that the usual method of 85% every 30 days was to be used, but plaintiff denies this. Over a month later, after P had completed only the first floor, P sent Ds a bill which defendants declined to pay because they claimed the work was not to specification. P then abandoned the job. The judge gave jury instructions that if there was no agreement as to payment times, payment should have been made at reasonable times and the P would be justified for abandoning the work. Held P was not justified in abandoning the work, because if there is no agreement on payment times on a contract for work, the work must be substantially completed before payment can be demanded. (this may be different now) Kelly Constr. Co. v. Hackensack Brick Co. (748) 1918 - P had a contract to build a school, so P contracted with D to supply bricks during the entire construction, but the contract did not indicate when payment would be made. After several deliveries, P did not pay D so D stopped supplying bricks. P covered from the market, and sued D for the difference. Held Summary judgment for P. Even though the Uniform Sales Act says that delivery of goods and payment should be concurrent unless otherwise agreed, these were installment deliveries and thus part of a whole delivery, and payment is not due until the entire delivery is completed. [UCC 2-307 says that if circumstances give either party the right to demand or deliver in lots, payment can be demanded in lots.] Tipton v. Feitner (749) 1859- P contracted to sell hogs to D, the first batch of dressed hogs in possession of the P to be delivered immediately for one price, and a second batch of live hogs at another price to be delivered later after they arrived to P. The batch of dressed hogs arrived to D, but defendant did not pay for them so the P sold the live hogs to another party. Was the delivery of the live hogs a condition precedent to payment for the dressed hogs that already arrived? Held No; D owes P for the price of the delivered dressed hogs. There was no language indicating either way in the contract, but there was also no indication that P was extending credit to D. Although this was part of one transaction, the two species of objects were different in type, different in price, and had different delivery dates. Held The P may have been in default on the second shipment at the time this action commenced, but for this the D can have a second action or subtract that amount from the award against D. The D is still obliged to pay for the first shipment. -HOWEVER: If before delivery of dressed hogs, seller says that he cannot deliver the live hogs:

Buyer may refuse acceptance of dressed hogs and not have to pay for them. Severable vs. divisible contract: conceptually, a lot of overlap Difference comes from whos liable to whom for what Severable - Looks like an installment contract Divisible failure to pay one installment does not void the entire contract R2C 253 Part Performance as Agreed Equivalents- if the performances to be exchanged under an exchange of promises can be apportioned into corresponding pairs of part performances so that the parts of each pair are properly regarded as agreed equivalents, a partys performance of his part of such a pair has the same effect on the others duties to render performance of the agreed equivalent as it would have if only that pair of performances had been promised. 2. Interpreting Conditions Promises vs. conditions: Condition: some operative fact subsequent to acceptance and prior to discharge. A fact can be made to operate as a condition only by the agreement of both parties or by the construction of the law. the fulfillment of a promise discharges a duty; the occurrence of a condition creates a duty. Glaholm v. Hays (759) 1841 - Mutually agreed in a charter party that the vessel will go to Trieste and load cargo and then to the UK. It will be 40 days in transit. Ds sued by ship owner for refusing to accept the charter. Ds say that the ship wasnt delivered in time. Whether a particular clause is a condition which, if not performed, allows the party to abandon the contract, or amounts only to a promise, the breach of which is recompensed by damages, must depend on the intentions of the parties. Clause specifying Feb. 4th date in the original contract is a condition, and therefore Ds can get out of the contract because it did not fulfill a necessary condition. Howard v. Federal Crop Ins. Corp. (759) 1976 - Ps allege that their tobacco crop was damaged by heavy rains. Before inspection by D insurance company, Ps plowed under the tobacco crops. The insurance agreement stated in 5(b) that it is a condition precedent to payment that the plaintiff establish the production of the crop and that the crop was damaged. In 5(f) it read that the crops shall not be destroyed until D makes an inspection. Held Section 5(f) does not on its fact make not plowing under crops a condition precedent to payment. It doesn't say that payment will be withheld if crops are destroyed. The two clauses don't purport to state the same kind of thing using different words, as might "condition precedent" and "warrant". It is undecided whether 5(f) was inserted because, if the crops were destroyed, proof would be impossible or simply more difficultit is simply decided that 5(f) doesn't necessarily make not plowing under crops a condition precedent to payment. -Just because a contract says promise or condition does not make it so. R2C 261 Interpretation of Doubtful Words as Promise or Condition- if it is unclear whether words create a promise or a condition, they are interpreted as creating a promise. However: Same words may sometimes mean that one party makes a promise and the other partys promise is conditional on that promise Somebodys gotta prove the condition: who should have the burden of proof? Old view: Condition precedent (creating obligations of contract): whoever wants to have the contract exist Condition subsequent (releasing obligations of contract): whoever wants it not to exist Most jurisdictions follow the 2nd restatement approach: A condition is an event, not certain to occur, which must occur, unless its nonoccurrence is excused, before performance under a contract becomes due. -every condition is precedent to an immediately performable duty Parsons v Bristol Dev Co (771) 1965 - D hired P to architect and construct a building. The agreement in 4(b) stipulated that phase two of the project would be conditioned on D's obtaining a loan. The agreement also said in 4(d) that if any work was abandoned or suspended, P would be paid for

services rendered. D thought the loan was going to go through and told P to continue with phase two, paying P 25% in advance as the contract required, and then the loan fell through and D stopped project. Held P is not due damages over the 25% already paid, because securing the loan was a condition precedent to the second phase. Held Section 4(d) does not provide an alternate source of payment, it only provides an acceleration of paymentit assumes the loan has been obtained, as it references the terms in 4(b). Held The condition precedent is valid, even though the condition related to the D, because D tried to obtain the loan in good faith. Held P cannot be paid under collateral estoppel, because D never claimed that the funds had been obtained, it simply told plaintiff to go ahead with phase two. Held There is no evidence that Bristol breached its duty to give plaintiff notice when the funds did not come through, and if there were such evidence, there is no evidence that plaintiff was harmed by any such delay. R2C 227 Standards of Preference with Regard to Conditions in resolving doubts as to whether an event is made a condition of an obligors duty, and as to the nature of such an event, an interpretation is preferred that will reduce the obligees risk of forfeiture, unless the event is within the obligees control or the circumstances indicate that he has assumed the risk. (see illus. on p 776) Royal-Globe Ins. Co. v. Craven (777) 1992 - D's insurance policy contained a 24-hour notice requirement for hit-and-run accidents, and required that P "promptly" report accidents. P had an accident and didn't report it until four months later, three months after she was released from intensive care. Held Even if D is released from the 24-hour-requirement because she was disabled, that only tolls the requirement, and does not remove it, so that after her disability period ends she is still required to promptly report the accident. Unclear what the time limit is, but she definitely surpasses it. Held P is not estopped from denying her liability because of failure of notice by its initially processing her claim, because estoppel only occurs when the estopped party induces the other party to perform some action. Here D had already performed the action of not submitting the claim on time before P's actions occurred. Held P is not liable for D's accident, because her notice was not prompt as required by the agreement. IMPRACTICABILITY CAN EXCUSE A CONDITION (at least temporarily) Porter v. Harrington (788) - 1928 A CONTRACT MUST GO OUT OF ITS WAY TO PREVENT WAIVER BY ONE PARTY DS ACCEPTANCE OF LATE PAYMENTS MUST BE CONSIDERED A WAIVER OF LIQUIDATED DAMAGES PROVISION P contracted to buy two lots for $60 up front and $10 per month until the balance was paid off. The contract stated that time was of the essence and that if prompt payment was not made, everything would be forfeited at "liquidated damages." One lot was paid for after three years. The year after that P made no payments, then for the next three years P made $60 in installments, another $60 in installments, and then $40 in one lump sum. The next year, when P tried to pay $30, D said that D had "exercised the option" and closed the account, even though the P was ready to pay the entire amount in full. Held P is allowed to continue the contract. The contract should normally be upheld as to its provisions for lack of prompt payment, but a contract must go out of its way if it wants to prevent a waiver by one party. In this instance, D's continued acceptance of late payments lulled P into thinking that P could pay late, and it would be unconscionable to forfeit all of P's rights with no warning. Clark v. West (792) 1908 - D hired P to write three law books, and made a contract that said that P would be paid $2 per page for each book, and an extra $4 per page if the P abstained from alcohol. After completion of the books, D refused to pay the extra $4 because P had not completely abstained from alcohol, but P alleged that D had waived this part of the contract. Are the two prices, $2 and $4, consideration for writing the book and consideration for abstaining from alcohol, which would mean that the consideration could not be waived; or is abstaining from alcohol a condition precedent to fulfilling the contract, which can be waived? Held The condition of abstaining from alcohol can be waived by the D. The subject of the contract was writing books, not abstaining from alcohol, and abstaining from alcohol was just to ensure timely

and quality deliverables; as such it can be waived. The contract shows that the agreed upon worth of the work was $2 per page. Held By accepting the first book and paying $2 per page, knowing P had not completely abstained from alcohol, but telling P that the full amount would be paid even though P had not strictly abstained, the D effectively waived its rights to the condition precedent of abstaining from alcohol. Aetna Cas. & Sur. Co. v. Murphy (796) 1988- Murphy was a third-party plaintiff dentist who impleaded third-party defendant Chubb Group insurance company. Chubb moved for summary judgment on the grounds that Murphy had failed to comply with the reasonably timely notice provision in the insurance agreement by waiting two years before reporting that he was being sued by Aetna for the way he dismantled his office when terminating a lease with Hopmeadow Professional Center. Held If the insurer suffered no material prejudice from the delay, the noncompliance with the condition of timely notice can be excused because it is not a material part of the contract. This is only true if: 1) This was a contract of adhesion; 2) Literal enforcement would result in forfeiture, relieving Chubb from any obligation; and 3) There might be something short of forfeiture that could protect Chubb's interest. Held Summary judgment against Murphy is appropriate. The burden of proving the insurance company was not materially prejudiced is on the insured seeking to be excused, and Murphy has not met that burden. 3. Conditions of Satisfaction (SKIP THIS SECTION) 4. Protecting the Exchange on Breach Plante v. Jacobs (813) 1960 - P contracted to build a house for D. When the house was completed, there were numerous little defects and a wall between the kitchen and the living room that made the living room about one foot smaller. Was there substantial performance so that the P can recover on the contract, or must P recover on quantum meruit? Held There was substantial performance so that the plaintiff may recover on the contract. Here the stock floor plan did not detail the construction, and there were no blueprints. small deviations from plan do not destroy the contract, unless the contract makes every detail the essence of the contract. Should damages be diminished value, cost of replacement, or should the defects be separated out? Held If it doesn't result in confusion, the small defects to which low repair costs can be assigned should s, while the items the replacement of which would cause economic waste should be assigned their diminished values. Here the costs of repairing plaster cracks, repairing the patio, and reconstructing the patio wall do not incur economic waste and should be assigned the cost of replacement. Moving the wall between the kitchen and the living room would cause economic waste, so it should be assigned diminished value, and there happens to be no diminished value to the house in this case, even though it's not what the defendants wanted. [This results in the strange outcome that, the larger the defect, the less recovery, because if moving the wall had cost less the plaintiffs would have had to pay for it, but because the defect is so large here the diminished value rather than the cost of repair rule is used.] Small defects cost of replacement Large defects diminished value (to avoid economic waste) here, there was no diminished value based on the error in the wall, so there was no recovery for diminished value. Jacob & Youngs v. Kent (817) 1921 - After living in a house for over a year, D discovered that the pipes installed in the walls by P were not made by Reading. The P had inadvertently made this mistake, Ds architect hadn't even noticed the difference, and the quality of the pipes were the same. Held There was substantial performance because the mistake was "unintentional and trivial." Parties may specify that performance of every term must be a precedent to recovery, but if there is silence the law is slow to impose a huge burden for a small defect. Hathaway v Sabin (824) 1891 If one party becomes involved in difficulties not his fault, but is ultimately able to perform, he will not suffer because the other party incorrectly assumed he would not be able to perform. There was a contract for P to entertain in an opera house. D was to provide the opera house and pay P $75 after the entertainment. There was a snow storm and at 10:00am D

decided not to turn on heating for the opera house, even though this process didn't need to commence until 4:00pm. Held D owes P $75 because by not providing the opera house D prevented P from fulfilling the Ps duty. Held The D is not excused because the snowstorm made Ps performance impossible, because plaintiffs were able to make a train and arrive in town in time anyway. D guessed wrong. As D made the decision in the morning, long before the deadline, the D probably didn't want to have the concert because there would be no audience, not because there would be no entertainment. Held There's no dispute to give to a jury. Ps upheld their entire end of the bargain, so D owes them $75. R2C 251 When a failure to give assurance may be treated as a repudiation (1) where reasonable grounds arise to believe that the obligor will commit a breach by non-performance that would of itself give the oblige a claim for damages for total breach, the oblige may demand adequate assurance of due performance and may, if reasonable, suspend any performance ofr which he has not already received the agreed exchange until he receives such assurance. (2) the oblige may treat as a repudiation the obligors failure to provide within a reasonable tie such assurance of due performance as is adequate in the circumstances of the particular case. Printing Center of TX v. Supermind Pub Co (828) 1984 - Facts: Appellee/Pl, Supermind sued Appellant/Df, Printing for the refund of a deposit under a written K to print 5000 books. Ee rejected the books b/c of off center art, crooked pages, wrinkled pages, inadequate perforation on a pullout page, and the use of gray paper when white was contracted. Legal Issue(s): Whether substantial performance applies in transactions involving K for the sale of goods, and whether the goods tendered were in conformity with the requirements under the K? Courts Holding: No, and the books did not conform. Law or Rule(s): If the goods or tender of delivery fail in any respect to conform to the contract, the buyer may reject the whole. Perfect Tender Rule. Court Rationale: If it was determined that the books failed in any respect to conform to the contract, the purchaser would not have a right to reject and to recover a refund of the purchase price, but would have a right to damages for breach of contract. Conformity does not mean substantial performance. There is no room in commercial contracts or sales law for the doctrine of substantial performance. If the goods fail to conform to either the express or implied terms of the K, the buyer has a right to reject them. Once the K has been determined, the evidence must be reviewed to see if the right goods were tendered at the right time and place. A showing of only a minor defect would constitute bad faith. The written K covers only essential terms such as quantity, trim size, and type of paper and cover. The type of paper specified was 30# white newsprint. The pages of the books were gray while the sample was white. A sample which is made part of the basis of the bargain creates an express warranty that the whole of the goods shall conform to the sample. Appellant knew that the books were to be sold to the public. Therefor it is implied in the K that the books be commercially acceptable and appealing to the public. They must pass w/o objection in the trade and be fit for ordinary purposes to be merchantable. ANT failed to carry its burden of proof that EE rejected the books in bad faith. The non conformities were not minor, and there is no evidence that the primary motivation was to escape a bad bargain. Plateq Corp. of North Haven v. Machlett Labs., Inc. (leaky x-ray tanks) (834) - 1983 Facts: Pl to manufacture 2 lead-covered tanks to Ds specifications (for testing x-ray tubes) and to correct any radiation leaks that might be discovered on installation. 1. Oct. 11: Although the project was delayed, Ds engineer, Yanello, indicated no dissatisfaction w/ the tanks and indicated that they would be picked up in a couple of days. 2. Instead Ds sent notice of cancellation which failed to specify grounds for cancellation. (825) Issue: Can a seller recover on K when buyer effectively accepts: ie. 1) cancels after signifying postinspection that he will accept or 2) cancels w/o notice and w/o giving reasons when defects (if any) were curable Rule: UCC 42-606(1)What Constitutes Acceptance of Goods: acceptance occurs when buyer 1) signifies after reasonable opportunity to inspect that he will take the goods despite nonconformity, or 2) fails to make an effective rejection (826)

meaning that a buyer cannot reject w/o 1) seasonable notice and 2) particularizing reasons for rejection when the defects could have been cured. For both reasons, the buyer accepted here. Holding: For seller. VII. The Rights and Duties of Nonparties 1. Third Party Beneficiaries Lawrence v Fox (843) 1859 WHERE ONE PERSON MAKES A PROMISE TO ANOTHER FOR THE BENEFIT OF A THIRD PERSON, THAT THIRD PERSON MAY MAINTAIN AN ACTION UPON IT. Holly gave 300 to Fox on the condition that Fox promise Holly that Fox would pay 300 to Lawrence. Fox did not pay Lawrence, and Lawrence sued Fox. Held where one person makes a promise to another for the benefit of a third person, that third person may maintain an action upon it. R2C 302 Intended and Incidental Beneficiaries see p 853, about 3rd parties H.R. Moch Co. v. Rensselaer Water Co. WATER COMPANY IS NOT LIABLE IN CONTRACT TO CITIZENS DAMAGED BY FAILURE TO PROVIDE SUFFICIENT WATER